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Domestic demand delights

11 Jul 2016, 08:00 | Posted by: Paul Donovan | Tags: Paul Donovan

Asian financial markets have become excited about the optimism of last Friday's employment report. Never mind that the frequency of revision gives this data all the substance of a soufflé – markets wanted to be positive, and this was an excuse.

The Bank of Japan saw broad money supply growth doing very little – which must be a disappointment given their rather frantic activity with narrow money supply. This has some global relevance, as other central banks (the ECB) have also been somewhat frantic in their policy prescriptions.

That august body, the G20 group of nations, saw trade ministers meet to opine (they would not meet to decided anything of course, because the G20 does not really do decisions). They warned of a decline in cross border investment flows.

One reason for the decline is, of course, the aftermath of the UK referendum result (as the UK is traditionally a very large recipient of foreign investment). The Bank of England meets this week as expected to cut rates – effectively transferring income from savers to borrowers.